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I think we can all agree that the 1st quarter of 2015 has had its fire works. We have seen the OIV (the oil VIX explode higher). We have seen the VIX itself average well above the average of the last two years (both 14.2%). However, I think the index that may be the most telling of the next quarter is EVZ, the EuroCurrency Volatility Index. VIX and OIV while elevated and high respectively have at least found a range. EVZ appears to be in the entering a stage similar to OIV in October

One thing that I always find interesting is how much the Chairperson of the Fed can drive no activity for an entire day. Today, with Janet Yellen speaking 15 minutes before the close, the market held a 5 point range for over 3 hours straight. Yet, before she even began speaking the VIX started to drop. In fact, buy the time she started VIX had essentially priced itself, and any vol selling that was done was quickly recovered. Notice the movement after yellow circle where Yellen starts talking:

We are only 3 months in but I think I found the trade of the year. No doubt the option charlatans out there will talk about this monster winner as the way to make things happen. Buy out of the money options in potential takeover stocks and walk away with untold riches. It is easy, right?

In the last 2 days the market has given away about 45 points, a nice move north of 1% a day in terms of movement. Yet, take a look at the price action of SPY and VIX over the last 5 days (since Thursday).

We open this morning with another launch of .5 to .7% depending on where things get to. I thought last week that 2015 was the year of the Iron Condor in the big indexes because there is lots of daily volatility but not really a follow through in any particular direction. That still looks to be the case. Mostly we have trading ranges that resemble a tempest in a teapot. The Fed keeping things steady (Mark called that several times over the last few weeks) puts another sword into the volatility.

Today the Fed announced that they are dropping the word patient from their statement, at the same time they announced they are patient. The net result was a pop in both short and long term bonds and a strong move in long term interest rates. In addition the Fed Fund Futures are now picking September or October for a rate hike (that might not even come then). The net result was that every 'crowded trade' got smoked except one, the VIX futures. Take a look at the curve:

If the last week has taught us anything its that the VIX might have itself a price whether the SPX goes up or down. Yesterday on the heels of a huge rally, the VIX barely moved. Today, in the middle of a decent sell off, the VIX was much the same. This basically means that traders feel like they have the vol of SPX options priced ahead of the Fed. Which also means that after the announcement the VIX could go back to the circled area below

We have another day like last week where the rally came from nowhere and is most likely not going to go anywhere. It feels like the algo driven market catches any new piece of news about the FOMC release and it is off to the races. The last 6 months has been about macro freight trains, collapse of the Euro, oil and commodity prices with a rocketing dollar. Greece isn’t even in the headlines anymore. As day went most stocks were up and VIX softened a bit before the Wednesday’s release.